What is Deductible Car Insurance
Accidents are unpredictable. And they can occur in moments when you are least prepared to cater for damages. So, how do you safeguard yourself against motor vehicle-associated accidents? Auto insurance is the only way. This is one of the most important actions that you can undertake to safeguard yourself against these unfortunate events. In most locations around the globe, it is illegal to drive without a valid auto insurance policy. Depending on the auto insurance you undertake, you will be required to pay premiums regularly. This can either be monthly, bi-annual, or even annual premiums. You might also be entitled to pay a deductible in the event of an accident.
What is a deductible and how does it work?
A car insurance deductible is an out-of-pocket payment that a policyholder remits when filing a claim. For instance, if you have a $4,000 claim in accident damage and a $1,000 deductible, your insurance provider will pay $3,000 to cater for the damages. You will be responsible for the $1,000.
Also, the policyholder will be responsible for claims that are less than the deductible amount. If you have a $1,000 deductible and the amount of damage is $600, the insurance provider will not cover any damage costs.
Deductible car insurance differs from deductible health insurance seeing that there is no set annual deductible amount. You only pay the deductible when filing a claim.
Generally, deductibles apply to:
Comprehensive coverage- This covers all accident causes except a crash in which the policyholder is at fault. For instance, comprehensive auto insurance will cover hail or damage from trees.
Collision coverage- This covers damage caused to your vehicle when involved in a crash with a stationary object or a vehicle. However, it does not cover damage caused to the other party’s property.
Why consider deductible car insurance?
Having a higher deductible car insurance means you will remit fewer premiums. This is because the deductible amount reduces the amount of money an insurer is mandated to pay in case of an accident.
You also get to select a deductible based on how much you can afford to pay in the event of an accident. If you can afford expensive repairs, opting for a higher deductible means that you get to save on premium costs. However, if your finances will be negatively affected by an accident, you can safeguard yourself by opting for a lower deductible.
What factors should you consider when choosing your auto insurance deductible?
1. Do you have an emergency fund? How much can you afford to remit if an accident occurs?
A car insurance deductible can either safeguard or ruin your finances. As such, choosing one based on the amount available in your emergency fund is prudent. If you can afford to pay the high amount of a large deductible if an accident occurs, it would save you on premium costs as you get to pay lower premiums. However, if paying a high deductible amount can cripple your finances, then it would be wise to pay a lower deductible amount and higher premiums.
If you have a tight budget, you can also explore other ways to save on your insurance costs. For instance, you may be surprised how much you can save by comparing quotes from different insurance providers, having a good credit score, improving your driving record and taking advantage of discounts that you qualify for.
2. Are you at a higher risk of making a claim?
Regardless of the driving experience, anyone can be involved in an accident. However, some factors can increase the likelihood of an accident. For instance, if you mostly drive on busy and risky roads, you are more likely to be involved in an accident as opposed to a person who drives on safer roads. If you are a high-risk driver, the likelihood of filing a claim is higher. As such, it would be wiser to have a low deductible and higher premiums.
3. The value of your car
High-worth vehicles are expensive to insure compared to cheaper or old vehicles. As such, getting a high deductible on an expensive vehicle can save insurance costs. On the other hand, a high deductible on low-worth vehicles may not be necessary as the high deductible amount may even be more than the value of the car.
4. The cost of the deductible car insurance
Insurance companies have different deductible car insurance packages. Ensure you calculate the amount you could save by having deductible car insurance. If you can save from the premium differences, then it would be wise to undertake the deductible car insurance.
5. The vehicle’s financing option
If another party has financed your vehicle, they may require types of coverage and deductible amounts limits. This means that even if you can afford a higher deductible amount, the lender may not allow it.
You do not have to pay your deductible if:
An insured driver is at fault for the accident
If an insured driver is at fault, then their insurance provider will cater to the damages. As such, you will not be required to pay the deductible.
A person files a claim against your liability coverage
A deductible does not cater to liability claims. As such, you will not remit out-of-pocket payments. Your insurer will cater for the damages caused to the other party up to the limit of your insurance policy.
You have a no-deductible policy
If you select a $0 deductible on your comprehensive coverage, you will not be required to remit any deductible if an accident occurs. However, expect to pay higher premiums.
Here are some more tips for deductible car insurance:
Always opt for an affordable deductible amount- While paying lower premiums may be tempting, you will not like it when that deductible payment is due. While you may be capable of remitting higher deductible amounts, you just never know how your finances can turn out tomorrow. However, if you have stable finances, you can opt for high deductible payments and save on premiums.
- Always have an emergency fund- While accidents can be prevented, they are sometimes beyond human control. As such, always have an emergency fund, especially if you opt for a higher deductible. You can start by saving the extra premiums you would remit if you had lower deductibles.